Steve Ballmer Just Said Something That Should Really Scare Microsoft Investors

There exists a sort of debate about Microsoft: Is it an enterprise company like IBM or a consumer company like Apple?

If it's a consumer company like Apple, it's had some major errors in the last ten years. It missed the rise of the smartphone market as we currently know it. It missed the rise of tablet computing as we currently know it.

Its most successful consumer product is the Xbox, but the Xbox is not a very big business. And one of the founding members of the Xbox team believes Microsoft has left it in a vulnerable state.

If Microsoft is an enterprise company, then why is it spending so much time and money on stuff like Bing, Xbox, Windows Phone, and the Surface RT? It should be going all-in on cloud computing and services.

If you were to ask Microsoft's CEO Steve Ballmer, his answer would probably be: It's a dumb question, we're both.

In an interview with Jason Pontin at MIT Technology Review, he said:

Our number-one thing is supplying products to consumers. That’s kind of what we do. Sixty-five percent of all PCs go to the consumer, not to the enterprise. Seventy percent of all Office suites go to the consumer, not the enterprise. One hundred percent of all Xboxes go to the consumer, not the enterprise. Now, we’ve monetized the enterprise better than the consumer, there’s no question about that. And there’s no question that there are things that we have done for both the consumer and the enterprise that we would like to improve. So I’m not trying to push back. I’m merely trying to highlight that we really are very involved in both. We’re building new capabilities to give the consumer what the consumer wants. Take pen computing [the use of a stylus on a tablet]: I think it’s fair to say we’ve been talking about pen computing for years, but it was hard to do that with OEMs who were not equally incentivized. Now we’re trying to lead a little bit with ?Surface Pro.

This quote has to be frightening to Microsoft investors. Ballmer is basically reminding everyone about how important consumers are for Microsoft.

It's hard to loook into the future and see Microsoft or Windows as a big part of consumers' lives, at least in comparison to iOS and Android.

Worldwide PC shipments were down 6.4 percent in the fourth quarter, according to IDC. It was expecting just a 4.4 percent drop. In the U.S., PC sales were off 7 percent for 2012.

The PC market is getting hammered by the iPad and other tablets. Consumers are choosing lightweight, affordable tablets instead of heavier, more expensive PCs.

Microsoft is now competing in the tablet market with its Surface RT, but sales of the Surface are to be small compared to Apple, Amazon, and Samsung, none of which use Windows for their tablets.

The success in the tablet is a carry over from the success in the smartphone market where iOS and Android are swallowing the market. The smartphone and tablet markets represent the future of consumer computing.

The fact that Microsoft is nowhere in each of these markets is scary. Ballmer reminding everyone that the bulk of its unit sales come from consumers is not going to soothe investor worries about the future of Microsoft.